06.03.2023 Volatile Week: Powell and Jobs Report

Stock traders are positioning for what could be a volatile week. Fed Chair Powell is testify in front of Congress on Tuesday and Wednesday and we have the highly anticipated February Jobs Report scheduled for release on Friday.

Fed 

Traders will be closing monitoring both events looking for clues regarding the Fed’s next move. As we’ve seen the past couple of weeks, there’s starting to be more and more debate about the Fed’s next few moves. A few weeks back the trade gave almost no chance for a 50-basis point rate hike at the March FOMC meeting, now there’s starting to be some talk as inflation and wage gains have stayed strong.

Bulls are cautiously celebrating what they view as a return to “disinflation” after the ISM Services Index late last week showed a slowdown in the “Prices Paid” component. One big takeaway from the full report is the increase in delivery times, new orders, and employment, which economists say indicates that the labor situation may be improving.

Thirteen services industries reported growth last month, including agriculture, construction, and retail trade. Only four reported a decline in activity, led by wholesale trade, transportation and warehousing, and information. The declines fit with trends we’ve seen across both the consumer and business economies as Americans opt to spend less on goods and more on services, while the tech industry (information) has been hit by the pullback in business spending and overall post-pandemic slide.

JOLTS

Investors are also anxious to see the January Job Openings and Labor Turnover Survey (JOLTS) on Wednesday which will provide some deeper insights into US labor trends and company hiring needs. 

Keep in mind, these are the last two big jobs reports before the Federal Reserve’s next meeting on March 21-22. Powell appears before the Senate Banking Committee on Tuesday and the House Financial Services Committee Wednesday. The actual report was released on Friday, in which the bank said it reiterated its strong commitment to getting inflation back to its +2% target rate. The report is mostly a backward looking summary of economic data and Fed policy but does contain some interesting insights.

Notably, the Fed is very focused on the impact of a tight labor market on inflation but the report warns that the country’s low labor force participation rate “is likely to remain well below its level from before the pandemic.”

Investors will be particularly tuned in to what Powell has to say in regard to recent data indicating the “disinflation” trend has stalled in January.

Other data to watch 

Today, the only data scheduled is Factory Orders. On the earnings front, Occidental Petroleum and Zoom are the highlights. Investors this week are also anxious to see Bank of Canada’s latest policy decision on Wednesday, with many on Wall Street expecting it to become the first major Western central bank to pause rate hikes.

Keep in mind, over the weekend China released a statement that is will aim for an economic expansion of “around +5%” for 2023, this would be its lowest economic target in three decades. Globally, things still seem to be slowing.

Amazon’s Cost-Cutting Binge Claims Another Casualty: Amazon is closing eight cashier-less Amazon Go locations in Seattle, New York, and San Francisco, marking the e-commerce giant’s latest round of cost-cutting amid slowing sales growth. Amazon’s efforts to crack physical retail have been beset with challenges. Besides the latest move to close eight Go locations, the company has shuttered bookstores and novelty shops around the country. Amazon also recently put on hold the expansion of Fresh stores as it evaluates how to make the chain stand out to shoppers.

Volatile Week: Powell and Jobs Report

Wishing you a great week!